While auto sales drop, Belvidere-produced models boom

Monday

Apr 28, 2008 at 12:01 AMApr 28, 2008 at 8:37 PM

The Dodge Caliber and the other two vehicles assembled at the Chrysler plant in Belvidere, the Jeep Compass and Jeep Patriot, had their strongest quarter of sales at a time that the auto industry as a whole — and Chrysler in particular — has been struggling to find buyers.

Alex Gary

When Dan Nelson of Belvidere landed a new job at Greenlee Textron’s plant in Genoa, he and his wife, Janet, needed a newer car for the longer commute to work.

They went to Anderson Dodge in Rockford, where a salesman showed them several used cars.

“This time, I really wanted something with low miles because I know I’m going to be putting a lot of miles on it,” Dan said. “Then we saw a (new) Dodge Caliber and took it for a drive. Right away, we decided this is what we want. It really was an impulse buy.”

It was an impulse quite a few buyers made in the first quarter of 2008.

The Caliber and the other two vehicles assembled at the Chrysler plant in Belvidere, the Jeep Compass and Jeep Patriot, had their strongest quarter of sales at a time that the auto industry as a whole — and Chrysler in particular — has been struggling to find buyers.

Auto sales in the U.S. in March dropped 12 percent. Experts are citing a combination of factors, from worries over the job market to restrictive lending practices from banks taking a beating from the housing market to rising food and gas prices cutting into middle-income budgets.

Gas prices, most agree, are a major factor. Buyers are making a major shift from low-mileage SUVs and trucks toward midsize and small cars and compact SUVs. In March, U.S. sales of cars were higher than those of light trucks: 684,000 units vs. 668,000. That’s remarkable in a big-engine-loving country where three of the top-five-selling vehicles annually have been the Ford F Series, Chevy Silverado and Dodge Ram trucks.

The shift has benefited dealers who had Calibers, Compasses and Patriots on hand, each of which is capable of getting 28 miles per gallon under optimal conditions. Overall, the worldwide sales of those three models surged more than 40 percent, growing from 41,972 in the first three months of 2007 to 58,979 through the first quarter of this year.

In terms of the Belvidere gains, most came from the Jeep Patriot, which went into production in December 2006 and saw sales grow from 3,809 through the first three months of last year to 28,299. Still, sales of the Caliber are running more than 5 percent ahead of 2007, and even though Compass sales dipped about 5 percent for the quarter, dealers worldwide sold 7,773 Compasses in March, the highest monthly total in the vehicle’s 22-month life cycle. In fact, the combined sales of the trio in March — 34,495 — was the monthly record for the Caliber era.

What is a bit ironic about the bullish sales figures is that dealers set the worldwide sales of the Caliber, Compass and Patriot in the same month the company eliminated the third shift at the Belvidere plant and let go of 1,100 workers. The company made the decision in early January, after a sluggish end to 2007 sales left many Chrysler products on dealer lots.

But if sales continue at or near the March pace, dealers may be scrambling.

“We have a managers meeting every Monday, and one guy in it said (Chrysler) may have to bring back that third shift,” said Dave Lusz, general manager at Anderson Dodge. “I don’t want to say I’m short, but I need more Calibers.”

A third shift is not in the company’s plans, but auto analyst Erich Merkle at IRN Inc. said Chrysler dealers have severely cut their backlogs. According to statistics from the Grand Rapids, Mich.-based market intelligence and technology firm, U.S. dealers had a 93-day supply of Calibers in October, a 142-day supply of Patriots and a 150-day backlog of Compasses. By the end of March, the Caliber supply was down to 48 days, the Patriot was at 39 days, and the Compass was down to 34 days.

Typically, automakers want dealers to have a 60-day supply.

“A little overtime may be in order, but Chrysler has to be a little cautious,” Merkle said. “The economy is proving to be difficult, and I’m not real keen on the small cars, either. Those typically are bought by people on tighter budgets, a younger demographic. Those folks tend to be the hardest hit when the economy sinks.”

Chrysler already is boosting employment at the plant. Company spokesman Ed Saenz verified by e-mail that Chrysler has contacted some of the workers let go in March to see if they’d be willing to work on summer contracts to fill in as permanent workers go on vacations. However, Saenz said, the hiring is seasonal and not a response to the sales increase.

But if the sales trends continue, the company may “at least consider” adding workers to the 2,500 employees at the plant, Stephen Landry, Chrysler’s executive vice president of sales, told reporters in a conference call April 1.

Catherine Madden, an analyst with market research firm Global Insight of Lexington, Mass., said the fact that Belvidere’s products are selling well isn’t entirely a good thing for Chrysler. The company makes more profit on its minivans and trucks than on its small cars and SUVs.

She noted that part of the first-quarter sales increase for the Caliber, Compass and Patriot came from incentives. Also, leftover 2007 Compasses had as much as $5,000 in incentives — considering that a bare-bones Compass starts at $17,055, that doesn’t leave much room for profit.

Still, the increasing sales means Belvidere workers shouldn’t be worried about reduced hours or even more layoffs — something workers at SUV- or truck-building plants are concerned about.

“Gas prices are certainly a factor,” Madden said. “There’s no doubt that (Ford, General Motors and Chrysler) need to focus on the compact and subcompact markets, and the Belvidere products are in a good spot right now. But Chrysler is going to have to improve those products as they get older.

“The Caliber still lacks engine power, and all three have a lot of plastic on the interior. There will be new competition in those segments. Those are ongoing concerns.”

Alex Gary can be reached at agary@rrstar.com or (815) 987-1339.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.